How is 'Control' defined in the context of an Embassy Suites By Hilton franchise?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
"Affiliate" means any natural person or firm, corporation, partnership, limited liability company, association, trust or other entity which, directly or indirectly, Controls, is Controlled by, or is under common Control with, the subject entity.
"Change of Ownership Transfer" means any proposed Transfer that results in a change of Control of Franchisee, the Hotel, or the Hotel Site and is not otherwise permitted by this Agreement, all as set out in Subsection 12.2.2.
A Competitor does not include an individual or entity that: (i) is a franchisee of a Competing Brand; (ii) manages a Competing Brand hotel, so long as the individual or entity is not the exclusive manager of the Competing Brand; or (iii) owns a minority interest in a Competing Brand, so long as neither that individual or entity nor any of its Affiliates is an officer, director, or employee of the Competing Brand, provides services (including as a consultant) to the Competing Brand, or exercises, or has the right to exercise, Control over the business decisions of the Competing Brand.
Source: Item 22 — CONTRACTS (FDD page 97)
What This Means (2025 FDD)
According to Embassy Suites By Hilton's 2025 Franchise Disclosure Document, the term 'Affiliate' is defined in relation to 'Control.' Specifically, an 'Affiliate' is any entity that directly or indirectly 'Controls,' is 'Controlled by,' or is under common 'Control' with the subject entity. This definition is important for franchisees to understand because it clarifies the scope of relationships that could have implications under the franchise agreement. For example, this definition could affect which entities are subject to certain obligations or restrictions outlined in the agreement.
The Franchise Agreement also defines 'Change of Ownership Transfer' as any proposed transfer that results in a change of 'Control' of the Franchisee, the Hotel, or the Hotel Site, unless otherwise permitted by the agreement. This definition highlights the importance of understanding what constitutes 'Control' because any transaction that alters the control of the franchise could trigger specific requirements or restrictions related to transfers.
Furthermore, the definition of 'Competitor' excludes entities that own a minority interest in a Competing Brand, provided that neither the entity nor its affiliates exercise, or have the right to exercise, 'Control' over the business decisions of the Competing Brand. This exception indicates that passive investments in competing brands are permissible as long as the investor does not exert control over the competitor's business decisions. Therefore, understanding the definition of 'Control' is crucial for franchisees to avoid inadvertently violating the terms of the franchise agreement through investments or affiliations.